SmileDirectClub Inc. shares tumbled after the company filed a lawsuit against the California Dental Board claiming that they attempted to intimidate its staff and customers in a series of raids on “SmileShops” across the state.
What is the SmileDirectClub
SmileDirectClub is a teledentistry company co-founded in 2014 by Jordan Katzman and Alex Fenkell. It is based in Nashville, Tennessee.
The company produces 3D-printed clear aligners and are a competitor of traditional braces and clear alignment companies like Invisalign.
The way it works is that communication with licensed orthodontic professionals and other SmileDirectClub staff take place virtually. Impression kits are sent to customers, after which teeth molds are reviewed by dentists or orthodontists who oversee the treatment process.
While most business and dentistry is conducted online, the company has 300 retail locations across the United States, Canada, Australia and the United Kingdom.
The suit, filed on behalf of Dr. Jeffrey Sulitzer, D.M.D., the company’s lead dentist, and his practice, along with the teeth-straightening startup, is seeking damages for what it calls a “campaign of harassment, intimidation, and anti-competitive conduct.”
The suit also says that Joseph Tippins, investigator in the enforcement unit of the Dental Board, told the company in 2017 that the Dental Board had an active investigation of SmileDirect’s operations. The company which went public in September did not make any disclosures regarding raids or investigations in its IPO documents.
SmileDirect did not immediately respond to a request for comment. The California Dental Board said it does not comment on pending litigation.
The suit comes days after the state of California signed a new law that changes the rules on ‘teledentistry,” the model used by SmileDirect. The bill includes protections for patients who undergo direct-to-consumer orthodontic treatment. This includes a provision that allows them to submit complaints to the Dental Board, even if they have signed nondisclosure agreements.
The protections were included after opposition to SmileDirect came from dentists and orthodontists, who have been critical of the company’s business model. That business model? SmileDirect offers clear aligners by mail to customers using either a 3-D image of their teeth taken at a so-called “SmileShop” or from an impression made using an online kit.
The company then develops and ships the clear aligners (a form of dental braces) and the customer undergoes a 5 to 10 month treatment plan. Dentists say any orthodontic procedure requires a thorough exam because any mistake can cause permanent damage and even break teeth.
SmileDirect has faced strong opposition from medical organizations, including the American Dental Association and the American Association of Orthodontists, which have accused it of endangering patients and practicing medicine illegally.
Earlier this month, Hindenburg Research published a report saying that the company has attracted more than 1,200 Better Business Bureau complaints in its five years of existence and that some of its practices have been deemed illegal by dental boards in Alabama and Georgia.
Hindenburg founder Nathan Anderson said customers have been forced to perform emergency dentistry on themselves and described an aggressive sales culture that pressures employees to “sell a new smile” to at least 70% of clients each month.
SmileDirect responded with a statement criticizing “organized dentistry” and its “anti-competitive legal actions.”
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